Batas Pambansa Bilang 68

THE CORPORATION CODE OF THE PHILIPPINES

Be it enacted by the Batasang Pambansa in session assembled:

TITLE I – GENERAL PROVISIONS

DEFINITIONS AND CLASSIFICATIONS

Section 1. Title of the Code. – This Code shall be known as “The Corporation Code of the Philippines.” (n)

Section 2. Corporation defined. – A corporation is an artificial being created by operation of law, having the right of
succession and the powers, attributes and properties expressly authorized by law or incident to its existence. (2)

Section 3. Classes of corporations. – Corporations formed or organized under this Code may be stock or non-stock
corporations. Corporations which have capital stock divided into shares and are authorized to distribute to the holders
of such shares dividends or allotments of the surplus profits on the basis of the shares held are stock corporations. All
other corporations are non-stock corporations. (3a)

Section 4. Corporations created by special laws or charters. – Corporations created by special laws or charters shall
be governed primarily by the provisions of the special law or charter creating them or applicable to them,
supplemented by the provisions of this Code, insofar as they are applicable. (n)

Section 5. Corporators and incorporators, stockholders and members. – Corporators are those who compose a
corporation, whether as stockholders or as members. Incorporators are those stockholders or members mentioned in
the articles of incorporation as originally forming and composing the corporation and who are signatories thereof.

Corporators in a stock corporation are called stockholders or shareholders. Corporators in a non-stock corporation
are called members. (4a)

Section 6. Classification of shares. – The shares of stock of stock corporations may be divided into classes or series
of shares, or both, any of which classes or series of shares may have such rights, privileges or restrictions as may be
stated in the articles of incorporation: Provided, That no share may be deprived of voting rights except those
classified and issued as “preferred” or “redeemable” shares, unless otherwise provided in this Code: Provided,
further, That there shall always be a class or series of shares which have complete voting rights. Any or all of the
shares or series of shares may have a par value or have no par value as may be provided for in the articles of
incorporation: Provided, however, That banks, trust companies, insurance companies, public utilities, and building
and loan associations shall not be permitted to issue no-par value shares of stock.

Preferred shares of stock issued by any corporation may be given preference in the distribution of the assets of the
corporation in case of liquidation and in the distribution of dividends, or such other preferences as may be stated in
the articles of incorporation which are not violative of the provisions of this Code: Provided, That preferred shares of
stock may be issued only with a stated par value. The board of directors, where authorized in the articles of
incorporation, may fix the terms and conditions of preferred shares of stock or any series thereof: Provided, That such
terms and conditions shall be effective upon the filing of a certificate thereof with the Securities and Exchange
Commission.

Shares of capital stock issued without par value shall be deemed fully paid and non-assessable and the holder of
such shares shall not be liable to the corporation or to its creditors in respect thereto: Provided; That shares without
par value may not be issued for a consideration less than the value of five (P5.00) pesos per share: Provided, further,
That the entire consideration received by the corporation for its no-par value shares shall be treated as capital and
shall not be available for distribution as dividends.

A corporation may, furthermore, classify its shares for the purpose of insuring compliance with constitutional or legal
requirements.
Except as otherwise provided in the articles of incorporation and stated in the certificate of stock, each share shall be
equal in all respects to every other share.

Where the articles of incorporation provide for non-voting shares in the cases allowed by this Code, the holders of
such shares shall nevertheless be entitled to vote on the following matters:

1. Amendment of the articles of incorporation;

2. Adoption and amendment of by-laws;

3. Sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the corporate property;

4. Incurring, creating or increasing bonded indebtedness;

5. Increase or decrease of capital stock;

6. Merger or consolidation of the corporation with another corporation or other corporations;

7. Investment of corporate funds in another corporation or business in accordance with this Code; and

8. Dissolution of the corporation.

Except as provided in the immediately preceding paragraph, the vote necessary to approve a particular corporate act
as provided in this Code shall be deemed to refer only to stocks with voting rights. (5a)

Section 7. Founders’ shares. – Founders’ shares classified as such in the articles of incorporation may be given
certain rights and privileges not enjoyed by the owners of other stocks, provided that where the exclusive right to vote
and be voted for in the election of directors is granted, it must be for a limited period not to exceed five (5) years
subject to the approval of the Securities and Exchange Commission. The five-year period shall commence from the
date of the aforesaid approval by the Securities and Exchange Commission. (n)

Section 8. Redeemable shares. – Redeemable shares may be issued by the corporation when expressly so provided
in the articles of incorporation. They may be purchased or taken up by the corporation upon the expiration of a fixed
period, regardless of the existence of unrestricted retained earnings in the books of the corporation, and upon such
other terms and conditions as may be stated in the articles of incorporation, which terms and conditions must also be
stated in the certificate of stock representing said shares. (n)

Section 9. Treasury shares. – Treasury shares are shares of stock which have been issued and fully paid for, but
subsequently reacquired by the issuing corporation by purchase, redemption, donation or through some other lawful
means. Such shares may again be disposed of for a reasonable price fixed by the board of directors. (n)

TITLE II

INCORPORATION AND ORGANIZATION OF PRIVATE CORPORATIONS

Section 10. Number and qualifications of incorporators. – Any number of natural persons not less than five (5) but
not more than fifteen (15), all of legal age and a majority of whom are residents of the Philippines, may form a private
corporation for any lawful purpose or purposes. Each of the incorporators of s stock corporation must own or be a
subscriber to at least one (1) share of the capital stock of the corporation. (6a)

Section 11. Corporate term. – A corporation shall exist for a period not exceeding fifty (50) years from the date of
incorporation unless sooner dissolved or unless said period is extended. The corporate term as originally stated in the
articles of incorporation may be extended for periods not exceeding fifty (50) years in any single instance by an
amendment of the articles of incorporation, in accordance with this Code; Provided, That no extension can be made
earlier than five (5) years prior to the original or subsequent expiry date(s) unless there are justifiable reasons for an
earlier extension as may be determined by the Securities and Exchange Commission. (6)
Section 12. Minimum capital stock required of stock corporations. – Stock corporations incorporated under this Code
shall not be required to have any minimum authorized capital stock except as otherwise specifically provided for by
special law, and subject to the provisions of the following section.

Section 13. Amount of capital stock to be subscribed and paid for the purposes of incorporation. – At least twenty-
five percent (25%) of the authorized capital stock as stated in the articles of incorporation must be subscribed at the
time of incorporation, and at least twenty-five (25%) per cent of the total subscription must be paid upon subscription,
the balance to be payable on a date or dates fixed in the contract of subscription without need of call, or in the
absence of a fixed date or dates, upon call for payment by the board of directors: Provided, however, That in no case
shall the paid-up capital be less than five Thousand (P5,000.00) pesos. (n)

Section 14. Contents of the articles of incorporation. – All corporations organized under this code shall file with the
Securities and Exchange Commission articles of incorporation in any of the official languages duly signed and
acknowledged by all of the incorporators, containing substantially the following matters, except as otherwise
prescribed by this Code or by special law:

1. The name of the corporation;

2. The specific purpose or purposes for which the corporation is being incorporated. Where a corporation has more
than one stated purpose, the articles of incorporation shall state which is the primary purpose and which is/are the
secondary purpose or purposes: Provided, That a non-stock corporation may not include a purpose which would
change or contradict its nature as such;

3. The place where the principal office of the corporation is to be located, which must be within the Philippines;

4. The term for which the corporation is to exist;

5. The names, nationalities and residences of the incorporators;

6. The number of directors or trustees, which shall not be less than five (5) nor more than fifteen (15);

7. The names, nationalities and residences of persons who shall act as directors or trustees until the first regular
directors or trustees are duly elected and qualified in accordance with this Code;

8. If it be a stock corporation, the amount of its authorized capital stock in lawful money of the Philippines, the number
of shares into which it is divided, and in case the share are par value shares, the par value of each, the names,
nationalities and residences of the original subscribers, and the amount subscribed and paid by each on his
subscription, and if some or all of the shares are without par value, such fact must be stated;

9. If it be a non-stock corporation, the amount of its capital, the names, nationalities and residences of the
contributors and the amount contributed by each; and

10. Such other matters as are not inconsistent with law and which the incorporators may deem necessary and
convenient.

The Securities and Exchange Commission shall not accept the articles of incorporation of any stock corporation
unless accompanied by a sworn statement of the Treasurer elected by the subscribers showing that at least twenty-
five (25%) percent of the authorized capital stock of the corporation has been subscribed, and at least twenty-five
(25%) of the total subscription has been fully paid to him in actual cash and/or in property the fair valuation of which is
equal to at least twenty-five (25%) percent of the said subscription, such paid-up capital being not less than five
thousand (P5,000.00) pesos.

Section 15. Forms of Articles of Incorporation. – Unless otherwise prescribed by special law, articles of incorporation
of all domestic corporations shall comply substantially with the following form:

ARTICLES OF INCORPORATION OF
__________________________

(Name of Corporation)

KNOW ALL MEN BY THESE PRESENTS:

The undersigned incorporators, all of legal age and a majority of whom are residents of the Philippines, have this day
voluntarily agreed to form a (stock) (non-stock) corporation under the laws of the Republic of the Philippines;

AND WE HEREBY CERTIFY:

FIRST: That the name of said corporation shall be “_____________________, INC. or CORPORATION”;

SECOND: That the purpose or purposes for which such corporation is incorporated are: (If there is more than one
purpose, indicate primary and secondary purposes);

THIRD: That the principal office of the corporation is located in the City/Municipality of ________________________,
Province of _______________________, Philippines;

FOURTH: That the term for which said corporation is to exist is _____________ years from and after the date of
issuance of the certificate of incorporation;

FIFTH: That the names, nationalities and residences of the incorporators of the corporation are as follows:

NAME NATIONALITY RESIDENCE

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

SIXTH: That the number of directors or trustees of the corporation shall be _______; and the names, nationalities and
residences of the first directors or trustees of the corporation are as follows:

NAME NATIONALITY RESIDENCE

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

___________________ ___________________ ___________________

SEVENTH: That the authorized capital stock of the corporation is ______________________ (P___________)
PESOS in lawful money of the Philippines, divided into __________ shares with the par value of
____________________ (P_____________) Pesos per share.
(In case all the share are without par value):

That the capital stock of the corporation is ______________ shares without par value. (In case some shares have par
value and some are without par value): That the capital stock of said corporation consists of _____________ shares
of which ______________ shares are of the par value of _________________ (P____________) PESOS each, and
of which _________________ shares are without par value.

EIGHTH: That at least twenty five (25%) per cent of the authorized capital stock above stated has been subscribed
as follows:

Name of Subscriber Nationality No of Shares Amount

Subscribed Subscribed

_________________ __________ ____________ ____________

_________________ __________ ____________ ____________

_________________ __________ ____________ ____________

_________________ __________ ____________ ____________

_________________ __________ ____________ ____________

NINTH: That the above-named subscribers have paid at least twenty-five (25%) percent of the total subscription as
follows:

Name of Subscriber Amount Subscribed Total Paid-In

_________________ ___________________ _______________

_________________ ___________________ _______________

_________________ ___________________ _______________

_________________ ___________________ _______________

_________________ ___________________ _______________

(Modify Nos. 8 and 9 if shares are with no par value. In case the corporation is non-stock, Nos. 7, 8 and 9 of the
above articles may be modified accordingly, and it is sufficient if the articles state the amount of capital or money
contributed or donated by specified persons, stating the names, nationalities and residences of the contributors or
donors and the respective amount given by each.)

TENTH: That _____________________ has been elected by the subscribers as Treasurer of the Corporation to act
as such until his successor is duly elected and qualified in accordance with the by-laws, and that as such Treasurer,
he has been authorized to receive for and in the name and for the benefit of the corporation, all subscription (or fees)
or contributions or donations paid or given by the subscribers or members.

ELEVENTH: (Corporations which will engage in any business or activity reserved for Filipino citizens shall provide the
following):

“No transfer of stock or interest which shall reduce the ownership of Filipino citizens to less than the required
percentage of the capital stock as provided by existing laws shall be allowed or permitted to be recorded in the proper
books of the corporation and this restriction shall be indicated in all stock certificates issued by the corporation.”
IN WITNESS WHEREOF, we have hereunto signed these Articles of Incorporation, this __________ day of
________________, 19 ______ in the City/Municipality of ____________________, Province of
________________________, Republic of the Philippines.

_______________________ _______________________

_______________________ _______________________

________________________________

(Names and signatures of the incorporators)

SIGNED IN THE PRESENCE OF:

_______________________ _______________________

(Notarial Acknowledgment)

TREASURER’S AFFIDAVIT

REPUBLIC OF THE PHILIPPINES)

CITY/MUNICIPALITY OF ) S.S.

PROVINCE OF )

I, ____________________, being duly sworn, depose and say:

That I have been elected by the subscribers of the corporation as Treasurer thereof, to act as such until my
successor has been duly elected and qualified in accordance with the by-laws of the corporation, and that as such
Treasurer, I hereby certify under oath that at least 25% of the authorized capital stock of the corporation has been
subscribed and at least 25% of the total subscription has been paid, and received by me, in cash or property, in the
amount of not less than P5,000.00, in accordance with the Corporation Code.

____________________

(Signature of Treasurer)

SUBSCRIBED AND SWORN to before me, a Notary Public, for and in the City/Municipality
of___________________Province of _____________________, this _______ day of ___________, 19 _____; by
__________________ with Res. Cert. No. ___________ issued at _______________________ on ____________,
19 ______

NOTARY PUBLIC

My commission expires on

_________, 19 _____

Doc. No. _________;

Page No. _________;

Book No. ________;

Series of 19____ (7a)

Section 16. Amendment of Articles of Incorporation. – Unless otherwise prescribed by this Code or by special law,
and for legitimate purposes, any provision or matter stated in the articles of incorporation may be amended by a
majority vote of the board of directors or trustees and the vote or written assent of the stockholders representing at
least two-thirds (2/3) of the outstanding capital stock, without prejudice to the appraisal right of dissenting
stockholders in accordance with the provisions of this Code, or the vote or written assent of at least two-thirds (2/3) of
the members if it be a non-stock corporation.

The original and amended articles together shall contain all provisions required by law to be set out in the articles of
incorporation. Such articles, as amended shall be indicated by underscoring the change or changes made, and a
copy thereof duly certified under oath by the corporate secretary and a majority of the directors or trustees stating the
fact that said amendment or amendments have been duly approved by the required vote of the stockholders or
members, shall be submitted to the Securities and Exchange Commission.

The amendments shall take effect upon their approval by the Securities and Exchange Commission or from the date
of filing with the said Commission if not acted upon within six (6) months from the date of filing for a cause not
attributable to the corporation.

Section 17. Grounds when articles of incorporation or amendment may be rejected or disapproved. – The Securities
and Exchange Commission may reject the articles of incorporation or disapprove any amendment thereto if the same
is not in compliance with the requirements of this Code: Provided, That the Commission shall give the incorporators a
reasonable time within which to correct or modify the objectionable portions of the articles or amendment. The
following are grounds for such rejection or disapproval:

1. That the articles of incorporation or any amendment thereto is not substantially in accordance with the form
prescribed herein;

2. That the purpose or purposes of the corporation are patently unconstitutional, illegal, immoral, or contrary to
government rules and regulations;

3. That the Treasurer’s Affidavit concerning the amount of capital stock subscribed and/or paid is false;

4. That the percentage of ownership of the capital stock to be owned by citizens of the Philippines has not been
complied with as required by existing laws or the Constitution.

No articles of incorporation or amendment to articles of incorporation of banks, banking and quasi-banking

institutions, building and loan associations, trust companies and other financial intermediaries, insurance companies,
public utilities, educational institutions, and other corporations governed by special laws shall be accepted or
approved by the Commission unless accompanied by a favorable recommendation of the appropriate government
agency to the effect that such articles or amendment is in accordance with law. (n)

Section 18. Corporate name. – No corporate name may be allowed by the Securities and Exchange Commission if
the proposed name is identical or deceptively or confusingly similar to that of any existing corporation or to any other
name already protected by law or is patently deceptive, confusing or contrary to existing laws. When a change in the
corporate name is approved, the Commission shall issue an amended certificate of incorporation under the amended
name. (n)

Section 19. Commencement of corporate existence. – A private corporation formed or organized under this Code
commences to have corporate existence and juridical personality and is deemed incorporated from the date the
Securities and Exchange Commission issues a certificate of incorporation under its official seal; and thereupon the
incorporators, stockholders/members and their successors shall constitute a body politic and corporate under the
name stated in the articles of incorporation for the period of time mentioned therein, unless said period is extended or
the corporation is sooner dissolved in accordance with law. (n)

Section 20. De facto corporations. – The due incorporation of any corporation claiming in good faith to be a
corporation under this Code, and its right to exercise corporate powers, shall not be inquired into collaterally in any
private suit to which such corporation may be a party. Such inquiry may be made by the Solicitor General in a quo
warranto proceeding. (n)

Section 21. Corporation by estoppel. – All persons who assume to act as a corporation knowing it to be without
authority to do so shall be liable as general partners for all debts, liabilities and damages incurred or arising as a
result thereof: Provided, however, That when any such ostensible corporation is sued on any transaction entered by it
as a corporation or on any tort committed by it as such, it shall not be allowed to use as a defense its lack of
corporate personality.

On who assumes an obligation to an ostensible corporation as such, cannot resist performance thereof on the ground
that there was in fact no corporation. (n)

Section 22. Effects on non-use of corporate charter and continuous inoperation of a corporation. – If a corporation
does not formally organize and commence the transaction of its business or the construction of its works within two
(2) years from the date of its incorporation, its corporate powers cease and the corporation shall be deemed
dissolved. However, if a corporation has commenced the transaction of its business but subsequently becomes
continuously inoperative for a period of at least five (5) years, the same shall be a ground for the suspension or
revocation of its corporate franchise or certificate of incorporation. (19a)

This provision shall not apply if the failure to organize, commence the transaction of its businesses or the construction
of its works, or to continuously operate is due to causes beyond the control of the corporation as may be determined
by the Securities and Exchange Commission.

TITLE III

BOARD OF DIRECTORS/TRUSTEES AND OFFICERS

Section 23. The board of directors or trustees. – Unless otherwise provided in this Code, the corporate powers of all
corporations formed under this Code shall be exercised, all business conducted and all property of such corporations
controlled and held by the board of directors or trustees to be elected from among the holders of stocks, or where
there is no stock, from among the members of the corporation, who shall hold office for one (1) year until their
successors are elected and qualified. (28a)

Every director must own at least one (1) share of the capital stock of the corporation of which he is a director, which
share shall stand in his name on the books of the corporation. Any director who ceases to be the owner of at least
one (1) share of the capital stock of the corporation of which he is a director shall thereby cease to be a director.
Trustees of non-stock corporations must be members thereof. A majority of the directors or trustees of all
corporations organized under this Code must be residents of the Philippines.

Section 24. Election of directors or trustees. – At all elections of directors or trustees, there must be present, either in
person or by representative authorized to act by written proxy, the owners of a majority of the outstanding capital
stock, or if there be no capital stock, a majority of the members entitled to vote. The election must be by ballot if
requested by any voting stockholder or member. In stock corporations, every stockholder entitled to vote shall have
the right to vote in person or by proxy the number of shares of stock standing, at the time fixed in the by-laws, in his
own name on the stock books of the corporation, or where the by-laws are silent, at the time of the election; and said
stockholder may vote such number of shares for as many persons as there are directors to be elected or he may
cumulate said shares and give one candidate as many votes as the number of directors to be elected multiplied by
the number of his shares shall equal, or he may distribute them on the same principle among as many candidates as
he shall see fit: Provided, That the total number of votes cast by him shall not exceed the number of shares owned by
him as shown in the books of the corporation multiplied by the whole number of directors to be elected: Provided,
however, That no delinquent stock shall be voted. Unless otherwise provided in the articles of incorporation or in the
by-laws, members of corporations which have no capital stock may cast as many votes as there are trustees to be
elected but may not cast more than one vote for one candidate. Candidates receiving the highest number of votes
shall be declared elected. Any meeting of the stockholders or members called for an election may adjourn from day to
day or from time to time but not sine die or indefinitely if, for any reason, no election is held, or if there are not present
or represented by proxy, at the meeting, the owners of a majority of the outstanding capital stock, or if there be no
capital stock, a majority of the member entitled to vote. (31a)
Section 25. Corporate officers, quorum. – Immediately after their election, the directors of a corporation must formally
organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a
secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the
by-laws. Any two (2) or more positions may be held concurrently by the same person, except that no one shall act as
president and secretary or as president and treasurer at the same time.

The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws
of the corporation. Unless the articles of incorporation or the by-laws provide for a greater majority, a majority of the
number of directors or trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of
corporate business, and every decision of at least a majority of the directors or trustees present at a meeting at which
there is a quorum shall be valid as a corporate act, except for the election of officers which shall require the vote of a
majority of all the members of the board.

Directors or trustees cannot attend or vote by proxy at board meetings. (33a)

Section 26. Report of election of directors, trustees and officers. – Within thirty (30) days after the election of the
directors, trustees and officers of the corporation, the secretary, or any other officer of the corporation, shall submit to
the Securities and Exchange Commission, the names, nationalities and residences of the directors, trustees, and
officers elected. Should a director, trustee or officer die, resign or in any manner cease to hold office, his heirs in case
of his death, the secretary, or any other officer of the corporation, or the director, trustee or officer himself, shall
immediately report such fact to the Securities and Exchange Commission. (n)

Section 27. Disqualification of directors, trustees or officers. – No person convicted by final judgment of an offense
punishable by imprisonment for a period exceeding six (6) years, or a violation of this Code committed within five (5)
years prior to the date of his election or appointment, shall qualify as a director, trustee or officer of any corporation.
(n)

Section 28. Removal of directors or trustees. – Any director or trustee of a corporation may be removed from office
by a vote of the stockholders holding or representing at least two-thirds (2/3) of the outstanding capital stock, or if the
corporation be a non-stock corporation, by a vote of at least two-thirds (2/3) of the members entitled to vote:
Provided, That such removal shall take place either at a regular meeting of the corporation or at a special meeting
called for the purpose, and in either case, after previous notice to stockholders or members of the corporation of the
intention to propose such removal at the meeting. A special meeting of the stockholders or members of a corporation
for the purpose of removal of directors or trustees, or any of them, must be called by the secretary on order of the
president or on the written demand of the stockholders representing or holding at least a majority of the outstanding
capital stock, or, if it be a non-stock corporation, on the written demand of a majority of the members entitled to vote.
Should the secretary fail or refuse to call the special meeting upon such demand or fail or refuse to give the notice, or
if there is no secretary, the call for the meeting may be addressed directly to the stockholders or members by any
stockholder or member of the corporation signing the demand. Notice of the time and place of such meeting, as well
as of the intention to propose such removal, must be given by publication or by written notice prescribed in this Code.
Removal may be with or without cause: Provided, That removal without cause may not be used to deprive minority
stockholders or members of the right of representation to which they may be entitled under Section 24 of this Code.
(n)

Section 29. Vacancies in the office of director or trustee. – Any vacancy occurring in the board of directors or
trustees other than by removal by the stockholders or members or by expiration of term, may be filled by the vote of
at least a majority of the remaining directors or trustees, if still constituting a quorum; otherwise, said vacancies must
be filled by the stockholders in a regular or special meeting called for that purpose. A director or trustee so elected to
fill a vacancy shall be elected only or the unexpired term of his predecessor in office.

Any directorship or trusteeship to be filled by reason of an increase in the number of directors or trustees shall be
filled only by an election at a regular or at a special meeting of stockholders or members duly called for the purpose,
or in the same meeting authorizing the increase of directors or trustees if so stated in the notice of the meeting. (n)

Section 30. Compensation of directors. – In the absence of any provision in the by-laws fixing their compensation,
the directors shall not receive any compensation, as such directors, except for reasonable per diems: Provided,
however, That any such compensation other than per diems may be granted to directors by the vote of the
stockholders representing at least a majority of the outstanding capital stock at a regular or special stockholders’
meeting. In no case shall the total yearly compensation of directors, as such directors, exceed ten (10%) percent of
the net income before income tax of the corporation during the preceding year. (n)

Section 31. Liability of directors, trustees or officers. – Directors or trustees who wilfully and knowingly vote for or
assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the
affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or
trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons.

When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the
corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a
disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for
the profits which otherwise would have accrued to the corporation. (n)

Section 32. Dealings of directors, trustees or officers with the corporation. – A contract of the corporation with one or
more of its directors or trustees or officers is voidable, at the option of such corporation, unless all the following
conditions are present:

1. That the presence of such director or trustee in the board meeting in which the contract was approved was not
necessary to constitute a quorum for such meeting;

2. That the vote of such director or trustee was not necessary for the approval of the contract;

3. That the contract is fair and reasonable under the circumstances; and

4. That in case of an officer, the contract has been previously authorized by the board of directors.

Where any of the first two conditions set forth in the preceding paragraph is absent, in the case of a contract with a
director or trustee, such contract may be ratified by the vote of the stockholders representing at least two-thirds (2/3)
of the outstanding capital stock or of at least two-thirds (2/3) of the members in a meeting called for the purpose:
Provided, That full disclosure of the adverse interest of the directors or trustees involved is made at such meeting:
Provided, however, That the contract is fair and reasonable under the circumstances. (n)

Section 33. Contracts between corporations with interlocking directors. – Except in cases of fraud, and provided the
contract is fair and reasonable under the circumstances, a contract between two or more corporations having
interlocking directors shall not be invalidated on that ground alone: Provided, That if the interest of the interlocking
director in one corporation is substantial and his interest in the other corporation or corporations is merely nominal, he
shall be subject to the provisions of the preceding section insofar as the latter corporation or corporations are
concerned.

Stockholdings exceeding twenty (20%) percent of the outstanding capital stock shall be considered substantial for
purposes of interlocking directors. (n)

Section 34. Disloyalty of a director. – Where a director, by virtue of his office, acquires for himself a business
opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he
must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the
stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be
applicable, notwithstanding the fact that the director risked his own funds in the venture. (n)

Section 35. Executive committee. – The by-laws of a corporation may create an executive committee, composed of
not less than three members of the board, to be appointed by the board. Said committee may act, by majority vote of
all its members, on such specific matters within the competence of the board, as may be delegated to it in the by-laws
or on a majority vote of the board, except with respect to: (1) approval of any action for which shareholders’ approval
is also required; (2) the filing of vacancies in the board; (3) the amendment or repeal of by-laws or the adoption of
new by-laws; (4) the amendment or repeal of any resolution of the board which by its express terms is not so
amendable or repealable; and (5) a distribution of cash dividends to the shareholders.